Make your mortgage payment during the Pandemic!

Henish Pulickal

April 29, 2020

There’s a lot of chatter about not making your mortgage payment:

“The government is letting me miss my payments for 3 months!”

“My mortgage company is giving me a forbearance. I can defer my payments for 3 months.”

“This won’t affect my credit history and it won’t negatively affect my credit rating.”

Let’s clear the air on this murky topic.  If you lost your job or are having other hardships and you need to postpone your mortgage payments so you can afford to pay for crucial expenses, then by all means do so.  It’s a crazy time and this is a decent way to ease the pain. 

But the truth is that this is not free money! At the end of 3 months your mortgage company is expecting you to make a lump sum payment for the 3 months you missed and the 4th month that’s due.  For example, if you have $2,000 monthly mortgage payment and you do a forbearance plan for 3 months, on July 1, you will owe $8,000

It’s safe to say, many people who defer their payments will have difficulty making this huge payment in month 4.  At that point, you will have to request a modification from your mortgage company to roll the missed payments into your principal balance or spread out the missed payments over X number of months to repay the company.  It is very likely your monthly payment could go up after a modification. Doing a modification will impact your credit and will be reported on your credit report.  If you need to defer your mortgage payments, be prepared to request a modification. 

Quick note on modifications: it is solely the mortgage company’s decision to grant you a modification.  They are not obligated to modify your loan.  If they decide not to give you a modification, they may choose to start the collection/foreclosure process.

If you can afford to make the payments, but want to defer to stay cash heavy, or for another reason, there may be consequences you have not considered.  If you plan to refinance your home or get a new mortgage to purchase property in the next 12-24 months, there is a strong likelihood that many lenders will ask to see proof of mortgage payment for the past 12-24 months.  They may request a VOM (verification of mortgage) from your current lender or ask for proof of payments via cancelled checks to ensure that you have zero late payments. 

If you deferred your payment, a new lender would likely put you in a higher risk profile for a new loan.  This may result in your inability to refinance or purchase a property for 12 to 24 months after your last deferred mortgage payment. 

Is it a wise idea to defer your payments?  If you are ok with making a huge lump sum payment in month 4, yes.  If you are ok with hoping you get a modification approved in month 4 (fingers crossed), yes.  If you are ok with the inability to get a new mortgage loan for 12 to 24 months, then yes.  If you have no other option and are living day to day and just hoping to get through this, definitely yes.  We are here for you during this difficult time.  Do not hesitate to reach out to us.

house on top of change

Henish Pulickal, Broker CalDRE 01866631

Blake Hedrick, Contractor CSLB 1044138

4250 Morena Blvd Suite E

San Diego, CA 92117

(858) 633-7812

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